RBNZ says OCR now expansionary, but still room for further smaller cuts

The Reserve Bank of New Zealand said its decision to cut the Official Cash Rate by 150 basis points to 5% meant that monetary policy was now in an expansionary position, although it still saw room for further smaller cuts given the economic risks were balanced more towards even slower growth and lower inflation. "Today's decision brings the cumulative reduction in the OCR since July to 3.25%, and takes monetary policy to an expansionary position," Governor Alan Bollard said. "Given recent developments in the global economy, the balance of risks to activity and inflation are to the downside," Bollard said. "Thus it is appropriate to deliver this reduction quickly to support the economy and keep inflation from falling below the target band." In the full Monetary Policy Statement the Reserve Bank said: "Balancing the various risks around the outlook, we assess some further, but significantly smaller reductions in interest rates may be warranted beyond the current policy decision." "The precise timing and magnitude of these reductions will depend on the information we receive on activity and inflation prospects over the coming months." The next Reserve Bank interest rate decision is scheduled for January 29.